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What kind of shock was it? Regional integration and structural change in Germany after unification

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  • Burda, Michael C.

Abstract

Eastern Germany's recovery from its unification shock has been accompanied by deep structural change and a mobility race--a regional integration process involving both capital deepening and labor thinning (outmigration). A constant-returns neoclassical model of economic integration is proposed to account for these facts. Adjustment costs and initial conditions determine dynamics and steady state regional distribution of production factors. The model also explains persistent wage and capital rate-of-return differentials along the equilibrium path. Under these conditions, observed factor price differentials contain information on those adjustment costs. Journal of Comparative Economics 36 (4) (2008) 557-567.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 36 (2008)
Issue (Month): 4 (December)
Pages: 557-567

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Handle: RePEc:eee:jcecon:v:36:y:2008:i:4:p:557-567

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: German reunification Regional integration Costs of adjustment Capital mobility Migration;

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References

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  1. Snower, Dennis J. & Merkl, Christian, 2006. "The Caring Hand that Cripples: The East German Labor Market After Reunification (Detailed Version)," IZA Discussion Papers 2066, Institute for the Study of Labor (IZA).
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  5. Barry Eichengreen., 1990. "One Money for Europe? Lessons from the US Currency Union," Economics Working Papers 90-132, University of California at Berkeley.
  6. Richard Rogerson, 2005. "Sectoral Shocks, Specific Human Capital and Displaced Workers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 89-105, January.
  7. Andrew B. Abel, 2002. "On the Invariance of the Rate of Return to Convex Adjustment Costs," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 586-601, July.
  8. Sinn, Hans-Werner, 1999. "EU Enlargement, Migration and Lessons from German Unification," CEPR Discussion Papers 2174, C.E.P.R. Discussion Papers.
  9. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
  10. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  11. Dennis J. Snower & Christian Merkl, 2006. "The Caring Hand that Cripples: The East German Labor Market after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 375-382, May.
  12. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
  13. Michael C. Burda, 2006. "Factor Reallocation in Eastern Germany after Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 368-374, May.
  14. Nicola Fuchs-Schuendeln, 2005. "Adjustment to a Large Shock - Do Households Smooth Low Frequency Consumption?," 2005 Meeting Papers 517, Society for Economic Dynamics.
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  16. Burda, Michael C. & Fuchs-Schündeln, Nikola & Buch, Claudia M. & Sinn, Hans-Werner, 2006. "Factor reallocation in eastern Germany after reunification," Munich Reprints in Economics 19974, University of Munich, Department of Economics.
  17. Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92.
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Cited by:
  1. Vollmer, Sebastian & Holzmann, Hajo & Ketterer, Florian & Klasen, Stephan, 2010. "Distribution Dynamics of Regional GDP per Employee in Unified Germany," Hannover Economic Papers (HEP) dp-461, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Krkoska, Libor & Robeck, Katrin, 2008. "Business environment and enterprise behaviour in East Germany compared to West Germany and Central Europe," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 568-583, December.
  3. Harald Uhlig, 2006. "Regional Labor Markets, Network Externalities and Migration: The Case of German Reunification," American Economic Review, American Economic Association, vol. 96(2), pages 383-387, May.
  4. Robert Orlowski & Regina T. Riphahn, 2008. "The East German Wage Structure after Transition," CESifo Working Paper Series 2511, CESifo Group Munich.
  5. Andreas Schäfer & Thomas Steger, 2010. "History, Expectations, and Public Policy: Economic Development in Eastern Germany," CESifo Working Paper Series 3184, CESifo Group Munich.
  6. Juan Carlos Martinez Oliva, 2009. "Riunificazione intertedesca e politiche per la convergenza," Mo.Fi.R. Working Papers 14, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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